Today is Sunday 20th January 2019 and we are briefly commenting on a report issued by Reuters today on China.
Reuters have just issued a report stating that it expects China to report tomorrow – Monday
“that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs, adding pressure on Beijing to roll out more support measures to avert a sharper slowdown.”
The report further states that
“analysts polled by Reuters expect the world’s second-largest economy to have grown 6.4 percent in the October-December quarter from a year earlier, slowing from the previous quarter’s 6.5 percent pace and matching levels last seen in early 2009 during the global financial crisis…….. That could pull 2018 gross domestic product (GDP) growth to 6.6 percent, the lowest since 1990 and down from a revised 6.8 percent in 2017.”
Whilst it is expected that China’s Government will intervene with various forms of stimulus measures most analysts are predicting that the situation is likely to get worse so much so that many are lowering their growth estimates for China to 6.3% this year.
Now we have issued a number of articles and videos in the Inner Sanctum highlighting what Reuters is now reporting. We have also cautioned listeners and subscribers to bear in mind that China represents nearly one third of global growth over the past 10 years and any slowdown in its economy are likely to have quite considerable effects upon much of the rest of the world.
Many of its problems have been easily identified due to the poor and problematic reporting from companies such as Apple and a number of car manufacturers. In addition, shipping figures indicate that China’s imports of a number of crucial raw materials are also down and this does not bode well for the future.
Now that said and in the interest of balance, 6.3% growth is still considerable when compared to that predicted for the US this year at or around 2.5% or other EU economies ay 2% or in some cases lower.
Nevertheless, if the second largest economy in the world is feeling the squeeze, then there is little hope for the rest, unless of course other countries can make up for it. However, a brief look at emerging market economies, the US, the UK, Europe etc its difficult to see where this could come from.
We have previously reported that Vice Premier Liu He is visiting Washington at the end of January to continue trade and tariff talks with the US and indications suggest that the outcome could indeed prove quite positive as both President Xi and President Trump need a political as well as an economic win at this time. However this must also be couched within the framework that even if such a positive agreement comes about and China also adopts stimulus measures – it still does not guarantee a full revival of economic fortunes.
Chen Xingdong, chief China economist at BNP Paribas, said
“investors should not expect the latest round of stimulus to produce similar results as during the 2008-09 global crisis, when Beijing’s huge spending package quickly boosted growth….What China can really do this year is to prevent deflation, prevent a recession and a hard landing in the economy,”
To help achieve this, Chinese policymakers have fast-tracked construction projects and cut taxes and some import duties to spur demand. The Central Bank has also cut the amount of reserves that banks need to set aside as reserves five times over the past year. These measures are likely to increase in 2019 including the prospect of further tax cuts and more Government spending on infrastructure to be announced at its annual Parliament meeting in March.
Either way, China though having an alleged robust economy is clearly under pressure and any reduction in its demand for raw materials or any reduction in its populations spending power will not prove positive for Chinese demand for gold and silver, unless of course investors take fright by these move and transfer funds from equities and corporate bonds towards precious metals. We shall have to wait and see what the formal announcement states tomorrow and what the repercussions from it will be.